Problem:
Your evaluation of a statistical sample indicates that there may be a material misstatement in the population. Upon analyzing the detected misstatements, a common cause was discovered: Most of the misstatements were caused by the failure to record sales returns on a timely basis. That is, sales were returned prior to December 31 but were recorded as January returns because the person who normally records sales returns was on vacation at year end.
How should the auditor proceed to determine whether accounts receivable and sales returns and allowances contain a material misstatement?